BEATING BURNOUT Two national organizations help pharmacies tackle a major threat to the profession
SCRIPT PICK-UP Remote delivery kiosks provide a cost-effective and profitable expansion for this pharmacy
The 5 Leadership Styles How to effectively lead your pharmacy
VOL. 11 ISS. 2 | JUNE 2022
08
CONTENTS ON THE COVER
20 F EATURE
| The 5 Leadership Styles
How to effectively lead your pharmacy
DEPARTMENTS
06 NEWS
| Understanding Biosimilars
Semglee is now available at local retail pharmacies
TRENDS 08
| Beating Burnout
Two national organizations help pharmacies tackle a major threat to the profession
TRENDS | Beating Burnout
11 RETAIL
| Pharmacy Refresh
Rules for remodeling your practice
28
16 SOLUTIONS
| Scan Tech
Add QR codes to your marketing efforts
28
SPOTLIGHT | Script Pick-Up
30
MONEY | Cash vs. Accrual Accounting
Remote delivery kiosks provide a cost-effective and profitable expansion for this pharmacy
33
How to choose the right accounting method for your pharmacy
OUTLOOK | Rebates, Get Your Rebates
Wholesaler rebates are complicated. Learn how to measure and maximize them
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
SPOTLIGHT| Script Pick-Up
3
E
ON THE WEB
ELEMENTS
The business magazine for independent pharmacy
VOLUME 11, ISSUE 2
Find more strategies, tips, and expert advice to improve your business.
JUNE 2022 PUBLISHER & EDITORIAL DIRECTOR Matthew Shamet EDITOR Gina Klein ART DIRECTOR Lisa Doherty
How Well Do You Know Your Prime Vendor Agreement? Your prime vendor agreement isn't exactly a beach read, but to consistently achieve the lowest cost of goods, you have to truly understand the terms.
CONTRIBUTING WRITER Erin E. Rand
How to Calculate Depreciation for Pharmacy Assets INTERESTED IN ADVERTISING? elements@pbahealth.com
Instead of deducting the whole cost of a new purchase all at once, depreciation lets you write off the expense of the equipment throughout its useful life, decreasing your tax burden for several years.
6 Inventory Management Formulas for Pharmacies These inventory management formulas will help you keep a tight grip on your inventory management for a more profitable pharmacy.
Elements magazine is published quarterly by PBA Health. Copyright © 2022 PBA Health. All rights reserved.
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NEWS
UNDERSTANDING BIOSIMILARS Semglee is now available at local retail pharmacies
I
n 2021, the very first interchangeable biosimilar insulin product,
with substituting biosimilars for reference products when the costs
Semglee (insulin glargine-yfgn), was approved by the U.S. Food and
are lower for patients. Pharmacists agree lower prices will help
Drug Administration. It acts as a less costly option to the long-acting
patients feel more comfortable taking a biosimilar, but the level of
insulin Lantus (insulin glargine) for patients with diabetes, and it has
price discount required to motivate pharmacists to recommend
been shown to improve glycemic control in adults and children with
biosimilars to their patients is still not clear and may depend on
type 1 diabetes and in adults with type 2 diabetes.
PBMs and insurance companies.
With Semglee now commercially available to retail pharmacies,
Because pharmacists are the most trusted healthcare
pharmacists have their first opportunity to dispense an
professionals in America, education on biosimilars is extremely
interchangeable biosimilar to their patients. This is a milestone,
important. Pharmacists should hold meetings with their team
because the approval process for a biosimilar product has many
members so that everyone understands the differences between
requirements to prove it is very similar to its reference product.
generic, biosimilar, and interchangeability and can explain them to
To be approved as a biosimilar, the company seeking approval
their patients.
must show the FDA that the data are very similar. They also must
To educate patients about biosimilars, pharmacists will need
show mitogenicity, as well as perform large studies with people
additional educational resources, such as fact sheets on biosimilars.
who have type 1 and 2 diabetes to prove the insulin is highly similar
These must be written at the appropriate literacy level so they
in terms of safety, efficacy, and immunogenicity. These are the
can be shared with patients. Educating and counseling patients
FDA standards for biosimilars; interchangeables, however, are a
will be an extremely important part of biosimilar adoption, as
bit different.
will making sure healthcare providers and team members alike
For a product to be approved as an interchangeable, the
are equipped with the education. This will make patients feel
FDA requires that the company holds studies that show they get
much more comfortable and accepting of the biosimilar in their
the same clinical results as the reference product. There cannot
healthcare journey.
be diminished efficacy, signs of safety issues, and absolutely no sign of difference in immunogenicity—and the FDA can change their requirements at any time. With approved products, interchangeability allows pharmacists to automatically substitute an interchangeable biosimilar in place of a reference product, without having to consult a prescribing physician. For a better understanding on how prepared pharmacists are to accept the opportunities of biosimilars, 115 retail pharmacists were surveyed by Cardinal Health in the 2022 Biosimilars Report.
BIOSIMILARS VS. GENERICS Are biosimilars and generics the same? While they may have their similarities, don’t be fooled. They’re actually very different. While both are marketed as cheaper versions of expensive name-brand drugs, and both are also designed to have the same clinical effect as the pricier medications, here’s how they differ:
The results have shown that while many say they’re optimistic about biosimilars helping to lower costs for patients, there are still questions and concerns. While most retail pharmacists have some familiarity with biosimilars and the concept of interchangeability, many have concerns about the FDA-approval process, especially in relation to the use of extrapolation. This information indicates a critical need
BIOSIMILARS •
Biosimilar drugs are highly similar, but close enough in duplication to accomplish the same therapeutic and clinical result
•
Biosimilars are modeled after drugs that use living organisms as important ingredients
to improve awareness and understanding of the science behind the FDA approval process for biosimilars so pharmacies can feel confident dispensing them. While pharmacists are still familiarizing themselves with biosimilars, nearly all respondents agreed they feel comfortable
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GENERICS •
Generic drugs are identical to the original in chemical composition
•
Generics are copies of synthetic drugs
5%
4%
3% 2%
1%
0%
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TRENDS
BEATING BURNOUT Two national organizations help pharmacies tackle a major threat to the profession
W
ith a patient waiting at the pharmacy counter, another on
COMMON CAUSES OF BURNOUT
hold, and a backlog of administrative work on the desk, a
The Covid-19 pandemic has certainly amplified feelings of burnout,
retail pharmacy can be an overwhelming workplace on the best of
but Rothholz emphasized it isn't a new phenomenon for pharmacy
days. When pharmacists and other staff members face demanding
staff. It has been brewing under the surface for many years across
workloads day in and day out, feeling overwhelmed can start to
the entire healthcare system.
transform into feeling burned out.
"Some of the issues surrounding well-being distress are not
"People get fatigued and they report out or don't show up
having enough staff, not having the resources or the technology
for work at all. You've got people who leave the job and, in some
to do your job, and the never-ending phone-ringing that disrupts
cases, leave the profession entirely,” said Mitch Rothholz, chief of
members of the pharmacy from providing care and focusing their
governance and state of affiliates and executive director at the
time on patients' needs," he explained. Pharmacy employees are
American Pharmacists Association (APhA), which has co-authored
often given a full plate of tasks with no one to assist when things
a new report on pharmacist well-being in the United States. Many
get chaotic.
pharmacies are having to reduce their hours of operation or even close entirely on days they don't have enough staff available. “It’s not sustainable for practices and is having long-term
On top of the typical prescription dispensing process, patient care services add another layer of stress on the day-to-day commotion of keeping the pharmacy running. Covid-19 vaccinations,
effects on the profession,” said Rothholz. Besides depleting the
testing, and treatment, along with the regular vaccinations and lab
workforce, burnout creates a negative work environment and a
tests, have to be performed within the daily workflow. "They all can
worse patient experience. It can manifest in employees being rude
contribute to feeling overwhelmed," Rothholz said.
with patients, or worse, making medication errors because they aren't alert or are distracted in their pharmacy duties.
Another exacerbating factor is the lack of down time. Lunch breaks are good, but Rothholz explained that many pharmacy employees need stretches of time during the workday to catch up on administrative tasks without being interrupted by patients or other pharmacy staff.
HOW TO REDUCE BURNOUT IN YOUR PHARMACY Even though well-being distress, which can lead to burnout, is a concern, there are changes you can make to lessen the impact in your community pharmacy. Rothholz gives four workflow remedies.
MINIMIZE PHONE CALLS
8
APPOINTMENT-BASED MODEL
GUARANTEE FOCUSED TIME
EDUCATE THE COMMUNITY
Divert phone calls to
"The appointment-
"You can set it up so the
Manage patients'
a call center or use
based model creates
first hour of the day or
expectations about
an interactive voice
a mechanism for
the last hour of the day
what pharmacy staff
recording system that
predictability for the
has no phone calls and
can reasonably do for
has clear messaging
team," Rothholz said.
no patients," he said.
them. “Harassment of
for patients. Or let your
Under this model,
Make sure it’s every
pharmacy personnel
front-end staff handle
pharmacy managers can
day, and that teams are
by the patients and
and direct incoming calls.
better align staff with
compensated for this
consumers is real,”
demand.
time.
Rothholz said.
pbahealth.com/elements
MANAGERIAL SUPPORT If you or one of your staff members is experiencing burnout, there are resources available. Rothholz recommended the Pharmacist Well-Being Index, a tool created through a collaboration between APhA and the Mayo Clinic’s Well-Being Index. "It's a set of nine validated questions that a team member can take to tell them about their well-being," he explained. "It looks at their level of distress based on their score and benchmarks them against other like practitioners. It also connects them to resources to help them manage their stress level. It is not a one-time survey, but instead is a tool that pharmacy team members can utilize to monitor the state of their well-being." Pharmacy staff members can answer the questions once a month, which can help them manage their stress levels and track their well-being over time. Although data is collected to learn more about workplace stress, Rothholz emphasized that individual scores are confidential. Data from the Well-Being Index shows that 32 percent of people who use the tool indicate a high distress level, and those people have a three-fold higher risk of a low quality of life and an eight-fold higher risk of burnout. A high distress level also correlates to higher risk of fatigue, medication errors, and a
PHARMACY WORKPLACE AND WELL-BEING REPORTING To discover more about how stress and burnout are affecting pharmacy practices across the United States, the American Pharmacists Association (APhA) and the National Alliance of State Pharmacy Associations (NASPA) have recently launched Pharmacy Workplace and Well-Being Reporting (PWWR). Pharmacy Workplace and Well-Being Reporting is a mechanism for pharmacy team members to anonymously report the positive and negative experiences they have in the workplace. "On the positive side, it's a team member saying that their supervisor commended them for how they approached a patient care situation, or that a supervisor made them feel heard and respected," Mitch Rothholz explained. "Negative reports are often about concerns for patient safety in the practice or some sort of error occurring." It's an anonymous way for pharmacy employees to voice their concerns, and the APhA and NASPA use these aggregate reports to identify trends in the field. The report of PWWR data was released in February, and it identified some alarming trends:
desire to leave their current job. Those are problems managers need to reckon with—both for the health of staff members and the health of patients. "Pharmacy managers have a responsibility to open up lines of
of reporters said their workplace recommendations were not considered or applied
communication with their team members and let them know that what they say to a manager is not going to be used against them," Rothholz said. "One of the biggest fears we have seen in our surveys is fear of retribution for bringing up a concern."
of problems reported were recurring
Rothholz also discouraged the inappropriate use of metrics—surveys and feedback indicate that it can cause employees to worry about being penalized for not meeting a numerical goal and prevent them from focusing on the needs of individual patients.
of reporters noted that staffing was at less than normal levels at the time of a negative experience
"Instead of focusing on metrics, it's really about having discussions with your team to see what is really happening in the practice and learning what the pressure points are so you can
reported experiences were negative, while only 4 were positive
come to a solution together," he said, though he noted that not all metrics are bad if they are appropriately designed and utilized, with input from team members. Refer to the Pharmacist's Fundamental Responsibilities and Rights document as a starting point for these discussions. "It's a template for things that can be done to address workplace and well-being issues without ignoring the responsibility pharmacists have to their patients and community."
The PWWR tool, and those created by state boards of pharmacy, provide data points for discussions by pharmacy teams, management and decision makers, but will only be optimized if team members submit data.
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
9
RETAIL
PHARMACY REFRESH Rules for remodeling your practice
W
hen your pharmacy first opened its doors, it was probably decked out with the era’s most stylish decor. But after two or
three decades, those once-stylish features may now read as dated and send the message to your patients that the practice is stuck in the past. You want your pharmacy’s look and feel to reflect the quality of care you provide. “You have to think about your customers’ experience when visiting your pharmacy. Do you want to look like a chain pharmacy, or are you trying to offer a friendlier, more welcoming environment?” said Christopher McClung, president and partner at Eclipse Brand Builders, a design-build firm based in Georgia. A remodel can help you keep up with the competition, and it communicates to your patients that your pharmacy is staying on the cutting edge of industry trends. This is especially important as the scope of retail pharmacy continues to expand. “An outdated look can be a determinant in customer apathy, especially when competitors have recently updated, and a remodel can rejuvenate customer excitement,” advised Bryon Muir, vice president of Knoebel Construction, which is based in the St. Louis area. Keep these tips in mind as you tackle your pharmacy remodeling project. WHY TO REMODEL As a pharmacist who works in the pharmacy space every single day, you may not notice ratty carpets or dinged fixtures. But your patients sure do. “I think retailers of all kinds need to visit their spaces with their customer glasses on,” McClung said. “They should try to experience their business as a customer would.” Think about what your space is telling patients, and if that message doesn’t line up with the message you want to send, it may be time for a remodel. Since there’s a significant investment involved with undertaking a remodel, it shouldn’t be done on a whim, but in order to stay competitive, your pharmacy will eventually have to make some updates. “One of these factors is making a market shift,” said Muir. “Several of our clients have decided to do that by taking a retail location and remodeling it into a hybrid of retail and service to compete more efficiently with the online market.” The landscape of pharmacy has changed rapidly over the last few years, and if you’re providing more clinical services than you have in the past, for example, you may want to remodel so your pharmacy can accommodate more than simple dispensing.
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
11
Owners often overlook their staff when thinking about a remodel, but you should make improvements with them in mind, as well. “It seems like everyone across the board is having trouble with hiring and retaining staff, and that can cost you,” McClung said. If your pharmacy’s workspace behind the counter is not well lit, dingy, cramped, or difficult to navigate, making improvements could help your productivity and your staff retention. Think about how to optimize your workspace to make staff members’ jobs easier and incorporate space for them to relax when they are on their breaks. CHOOSING A CONTRACTOR Embarking on a remodel is a big decision, so pharmacy owners need to be sure they have the right partners. You have two choices when working with contractors. The more traditional route is the design-bid-build method, where you hire a designer to draw up plans then have contractors bid on the project. The other option is using a design-build firm that handles designs and construction all under one roof. If you’re going the design-bid-build route, McClung said to make sure you have thoughtful designs before soliciting bids. “You can call contractors to come out and give you prices, but without a complete design and consistent scope of work, they are giving you pricing and information based on their individual opinion of what needs to be done on your project, which can vary wildly from contractor to contractor,” he said. “You need an experienced design firm to work with you to turn your goals and objectives into accurate and well-thought-out drawings and specifications for a project.” Once you’ve settled on a contractor, thoroughly vet them before you start work. “When interviewing a potential general contractor for your upcoming remodel or renovation, it’s always a good idea to verify the experience that not only the company has, but the project management team that they will be assigning to your project,” Muir recommended. Even if the company has decades of experience doing remodels, if they’re assigning their newest project manager to your pharmacy remodel, you may not reap the benefits of that experience. Ask for references from past clients with remodel projects similar to your own. “A good general contractor would never shy away from providing three or more comparable references and if they don’t give you client references for similar project types, then they most likely don’t have the experience they’re telling you they have,” Muir said. When speaking with references, McClung suggests asking a broad scope of questions. Ask about the quality, of course, but also ask about if they completed the work within the established schedule, if there were many change orders, and if they ran into any other unique challenges during their project. “One of the biggest issues we’re running into these days is availability of subcontractors,” he said. “There’s a lot of work happening and there’s a shortage of labor. These things are out of control for everyone, but some people are doing a better job than others at managing it.”
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DESIGN-BUILD VS. DESIGN-BID-BUILD When starting on a remodel project, there are two routes: designbuild and design-bid-build. THE DESIGN-BUILD ROUTE In a design-build project, a single company manages the design and the implementation of the remodel. It’s typically the faster option, since you’re working with the same team throughout the entire process. It’s also easier to stay on budget because the build team is involved in the design phase and can help work out any potential issues before construction starts. This option also reduces the time and involvement in a project for owners since they don’t have to be the middleman between designers and contractors. However, when you go the design-build route, you may not go through a bidding process, which could make it harder to find the best price. You may also sacrifice flexibility as the project moves along at a fast clip. THE DESIGN-BID-BUILD ROUTE With the design-bid-build method, the pharmacy hires the designer and the contractor separately, placing the owner at the center of the team. The design firm creates the design for the remodel, then the pharmacy gets bids from contractors who estimate the price to complete the work. The bidding system means the pharmacy owner can weigh their options and choose the most competitive price. Owners also have the freedom to choose vendors. On the downside, because designers and contractors aren’t always on the same page, there’s a higher risk of change orders, which adds to the overall price tag. Lack of communication between each party can cause logistical problems and delays.
Another thing to check on is the contractor’s current workload.
Thorough drawings can also prevent unforeseen issues with
If a company has a heavy workload, that can be a sign that they
the building. “I could not count the times that we’ve opened up a
do quality work, but it also could be a sign they won’t have time
wall and found a column that wasn’t known to exist or discovered
to give you personalized service. Instead of going with the trendy,
that the sanitary lines weren’t deep enough for a new restroom or
in-demand contractor, you may have better luck with a smaller
fixture to be installed,” Muir said.
operation that can devote time and attention to your remodel.
Designers should make an exploratory visit to your pharmacy space so they have a good idea of any problems that might crop up.
MANAGING COSTS
They should look at the building’s original structural plans to get an
Renovating your pharmacy is a big investment, but there are certain
idea of what they are working with, but be aware that sometimes
things you can do to minimize costs.
those can be incorrect. There are unobtrusive ways that design
Both Muir and McClung emphasize the best way to keep costs down is to minimize change orders. That can usually be accomplished by having designs that are thorough.
teams can open the walls, floor, and ceiling to eliminate surprises during the construction process. Even though keeping costs low is a priority for most
Don’t start construction until you have a design that you are
independent pharmacy remodel projects, McClung said not to
completely happy with. “The higher the quality of the drawings and
let budget concerns get in the way of creating the space you’re
the more accurate they are, the fewer surprises there will be during
dreaming of. “I have never had anyone say they felt like they spent
construction,” McClung said. “Think of the designs as an instruction
too much money at the end of a project. Usually, they say that they
manual. Construction should be able to follow the drawing exactly
shouldn’t have waited so long.”
as they are.”
REMODELING TRENDS To give your pharmacy a modern feel, incorporate some of these popular retail remodeling trends.
DESIGNING FOR COMFORT
MINI DEPARTMENTS
Make changes that make the wait for prescriptions seem shorter.
In your front end, consider breaking up your traditional aisle format.
Have comfortable chairs in your pharmacy area. Add a TV or some
Create mini departments with varied fixtures and colors to increase
kind of digital signage to capture patients’ attention.
product visibility.
EXAM SPACE
EXTRA DOORS
With pharmacies providing more clinical services, private space
Install additional entrances that open into specific service areas, like
is a necessity. Consider adding in a dedicated exam room for
online order pickup. This way, patients on a mission don’t have to
immunizations and counseling.
navigate the rest of the pharmacy.
DRIVE-THRUS
SELF-SERVICE KIOSKS
Because of the Covid-19 pandemic, more patients want to pick up
Add kiosks within your front end for patients to check product
their prescriptions without leaving the comfort and safety of their
availability or look up additional information. Another high tech
cars. Adding in a drive-thru creates that convenience.
option is to add a self-checkout option.
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
13
FINANCING YOUR RENOVATION Unless you’re sitting on a large cash cushion, you’ll most likely have to seek a loan to finance your renovation project. Look for a 7(a) loan backed by the U.S. Small Business Administration (SBA). They offer perks for small businesses like lower interest rates, longer repayment terms, and smaller down payment requirements. The major caveat to SBA loans is that most applications are denied on the first try. To secure your loan, you’ll need to put together an airtight loan package. Include these essentials to make your pharmacy’s application stand out and improve your chances of approval. STATEMENT OF PURPOSE
FINANCIAL STATEMENTS
A statement of purpose, sometimes called an executive summary, is
Lending institutions want to know your pharmacy is a good
the first item in your loan package, and it gives lenders a quick idea
investment and have confidence you’ll be able to pay back
of why you’re seeking a loan. It should include:
your loan.
•
The amount of money you’re seeking
•
The purpose of your loan
These four statements will give lenders an idea of your pharmacy’s
•
Available collateral
financial footing:
•
Duration and terms of repayment
•
Cash flow statement: This statement shows how money moves in and out of your pharmacy on a monthly basis. Include 12
Your statement of purpose should also include a brief description of
months of cash flow statements and 6 months of projected
your pharmacy. Since SBA loans require owners have equity in their
cash flow.
business, you’ll also want to describe any investments you’ve made
•
in the pharmacy.
Income statement: Sometimes known as a profit and loss statement, the income statement shows your profits over a period of time. Include income statements from the last three
BUSINESS PLAN You created a business plan when you first started your pharmacy,
years in your loan package. •
but it will probably need a refresh for your loan application. Most
liabilities to demonstrate your total net worth. Include three
banks won’t even consider giving your pharmacy a loan if you don’t have an up-to-date business plan.
Balance sheet: This statement measures assets against years’ worth of balance sheets.
•
Personal financial statement: Since SBA loans require you to be invested, lenders want to know about your personal debts and
The business plan included in your loan package should have:
assets along with those of your business.
•
A vision statement and mission statement
•
Market analysis
POLISHED PRESENTATION
•
Description of your products and services
Pay attention to the finishing touches before submitting your SBA
•
Overview of your pharmacy operations and management
loan package. It shouldn’t just be a collection of facts and figures—it should tell the story of your pharmacy and convince lenders of your
"I HAVE NEVER HAD
competence and passion. Give your loan package a final pass for
ANYONE SAY THEY
look unprofessional, and you don’t want to give lenders any reason
FELT LIKE THEY SPENT TOO MUCH MONEY AT THE END OF A PROJECT. USUALLY, THEY SAY THAT THEY SHOULDN’T HAVE WAITED SO LONG.” 14
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spelling and grammar errors. Even small mistakes can make you to hesitate.
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SOLUTIONS
SCAN TECH Add QR codes to your marketing efforts
B
y now, most of your patients can immediately recognize a QR, or Quick Response, code. “How I used to describe it to my mother
No matter how you use QR codes, where you place them in your pharmacy can make or break their effectiveness.
was a pretty little black and white square with lots of other little
Research your traffic patterns to learn how people move
squares on the inside,” said Maryann Moschides, chief marketing
through your store and find out where they’re walking or waiting.
officer and general manager at Scanbuy, Inc., a mobile engagement
When patients are waiting for prescriptions, their eyes will naturally
company that helps companies of all sizes take advantage of QR
drift to signage in the environment, and they’ll be especially
code technology.
receptive to a QR code. They can be placed on shelf talkers, on
The pandemic helped launch the QR code into the stratosphere. They can be seen on boarding passes, in restaurants
display cases, or at the register when patients are checking out. Even outside your pharmacy waiting area, there are places in
to connect to a menu, and even in television commercials. “Almost
the front end where patients are more likely to linger, and that’s
everyone has a smartphone that can scan a QR code, even our
where QR codes can be effectively deployed. “When you have signs
parents and grandparents,” Moschides said.
while they’re staring at options and deciding what to pick up, like in
The ubiquity of this technology means it can be a potent tool
a fridge or freezer section, that’s where they may scan more often,”
for marketing your pharmacy. Because the pandemic has given
Moschides said. When you understand where your patients are
your patients a crash course in how to interact with QR codes, you
spending the most time, you can create a strategy to reach them
don’t even have to provide much education. Simply use QR codes
with QR codes at the right point in their shopping journey.
to further your marketing message. “We’ve found that retailers
When you think about QR code placement, be sure it’s in a
and brands have recognized the value of the QR code to engage
location that is easy to see and scan. You can create a beautiful
with customers and improve the business environment for them,”
poster with a great call-to-action and a large QR code, but no one
Moschides said.
will engage with it if the poster is hidden in a corner or obscured by
Here’s how you can effectively implement QR codes in your pharmacy.
a plant. “We’ve seen brands put codes on display cases or high on shelves where consumers can’t really access it,” Moschides said. “You have to be thoughtful, because if it’s in the wrong place, the
QR CODE BASICS
marketing campaign could fail, and it has nothing to do with the
There are many ways you can use QR codes in the pharmacy, but
QR code.”
the end goal should always be the same: making things easier for your patients. “When you’re in an environment where there aren’t always employees standing next to the shopper to answer questions or give information, that’s where QR codes can come in handy,” said Moschides. QR codes can also be used to direct patients to digital resources. If you have a pharmacy app, you can give them a flier with a QR code on it that will help them download the app quickly.
SCAN TO APPLY
It’s a seamless process with fewer steps than asking them to type in a specific URL or search for it in an app store. Additionally, QR codes can be used to create even more touch
Patients aren’t the only people you can reach with QR codes. They can also be used to reach potential employees. With retail
points with patients. “We find that for folks who are trying to grow
pharmacies facing a worker shortage, making your application
their mailing lists, QR codes can be a good shortcut,” Moschides
process available and accessible will help you reach more
said. “You can have people scan to join a loyalty program or scan for
candidates. “When you pair it with a sign that says, ‘We’re
more coupons, and then people give you permission to email them
hiring,’ you can link a QR code to an application that makes it
or text them. It helps you find the people who really want to engage
easy for candidates to submit resumes and apply for positions,”
with your brand.”
said Moschides.
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WHAT ABOUT QR CODE ROI?
MASTERING MESSAGING Placement isn’t the only important thing to think about when putting QR codes in your pharmacy. You also need a compelling message that aligns with your current marketing strategy.
To make the most of your QR code marketing, take advantage of dynamic, or traceable, QR codes.
“You need to have messaging that is encouraging and inspiring, and really jumps out,” Moschides said. “Something like, ‘Scan this to schedule an appointment,’ or ‘Scan to win,’ will really catch people’s attention.” She says the biggest mistake companies make is not including a call to action with their QR codes. “No call to action, nobody will scan it.” If there is a lone QR code, people will assume it’s a UPC code or exists for some logistical purpose. “It’s really about creating a marketing message that gets people to do more,” Moschides explained. “You don’t want them to just read a couple lines of text and move on. You really want
NUMBER OF SCANS
WHEN SCANS TOOK PLACE
WHAT DEVICES
WHICH CODES ARE SCANNED
people to continue to engage.” Don’t be afraid to get creative with QR codes. One way to get patients to interact with the code is by tying it to a contest or giveaway. “Contests always get scans,” Moschides said. “It’s just human. People want to be a part of something, so they will scan for the chance to win.” Create a QR code scavenger hunt or have patients scan a code to be entered into a giveaway. This is also a good way to collect email addresses and further expand your marketing reach. You don’t have to limit QR codes to in-store experiences, either. Include them on direct mail or outdoor advertisements like billboards to catch people’s attention during their day-today life. Some businesses are even including QR codes in TV
PEOPLE USE
commercials—and seeing scans in impressive numbers. “People are sitting on the couch watching TV, and they almost always have their phones with them,” Moschides pointed out.
With this data, you can tailor your QR code strategy to your patients’ scanning habits. Using a dynamic QR code, you can perform A/B testing to determine which marketing messages are encouraging people to scan. You can also identify hot spots—you may discover patients are scanning most often when they are standing in the pharmacy waiting area or idling in the drive-thru lane, but they hardly ever scan the code at the register. The analytics available to you will depend on which QR code provider you choose, so do your research before committing to a plan.
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
17
LOGISTICS When you’re placing a QR code, you also need to think about how big it needs to be. “It all depends on where the shoppers are scanning the code from,” Moschides explained. The farther away they are, the larger it needs to be. For a code on the back of a receipt, you can create a code that’s half an inch by half an inch, but never go any smaller, because some phone cameras won’t
QUICK QR STATISTICS •
87% of people have scanned at least one QR code in their
•
37% of people scan a QR code at least once a week
•
91% of iPhone users have a built-in QR scanner
•
5.3 billion QR code coupons will be redeemed in 2022
lifetime
be able to scan the image. The rule of thumb is a QR code should be sized based on a 1:10 ratio—for every 10 inches away a person is, the code needs to be one inch wide. So, if a code is designed to be scanned from five feet away, it should be at least six inches wide. Also be conscious of color. There should be enough contrast that the code is immediately visible to patients. “I noticed a retailer recently that put a light gray QR code on a glass window of their store,” Moschides said. “You could see that there was a sticker there, but you couldn’t read the message or scan the code. It was basically invisible.” Don’t forget about the user experience on the other end of the QR code, either. Essentially everyone will be using their phone to scan the code, so it is critical to design your QR code experience for mobile. “If you don’t have a mobile-friendly website, you’ll just disappoint the scanner,” said Moschides.
Sources: MobileIron; Apple; Juniper Research
EXPAND YOUR REACH Use these QR code strategies to share information with your patients and collect data to help you improve pharmacy services. Store information: Place a QR code in your pharmacy window so patients can learn more about your hours, safety practices, current promotions, or other pharmacy procedures. Product information: Use QR codes on hangtags or shelf-talkers so patients can find out more about the products on your shelves. Online connection: Create a QR code that immediately connects instore shoppers to your pharmacy app or social media pages. Appointment scheduling: Patients who want to schedule an appointment for pharmacy services can scan a QR code. Feedback collection: Use QR codes to direct patients to a customer satisfaction survey. Creative engagement: Put together a QR code scavenger hunt or contest with a tempting prize. Payments: QR codes can be used to combine a touchless payment experience with customer loyalty perks.
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FEATURE
THE 5 LEADERSHIP STYLES How to effectively lead your pharmacy
O
f all the tasks involved in running or managing a pharmacy,
personal development. Any person, even an introverted pharmacist,
leadership often gets the short stick. You won’t find many
can lead. It is less about who you are but how you choose to relate
pharmacy CE courses on “cultivating an effective leadership style” or
to those in your charge. That means that every leader can work on
“organizing your team around a shared purpose.” But your leadership
their leadership as they would any other skill. “People can improve
affects your pharmacy’s success as much as your clinical prowess or
their leadership with practice, instruction, and feedback from others.
retail skills.
Leadership can be studied and learned,” Ohler said. Lewin defined three styles of leadership that are still used
What you do at the top flows to the bottom (even the bottom line), says Gary Ohler, MBA, executive program leader at Maxwell
today: authoritarian, participative, and delegative. After Lewin came
Leadership and CEO of APPEX Partners. “Strong leadership is vital
Bernard M. Bass, the most cited leadership scholar in the world,
to ongoing success,” Ohler said. “The culture of the business reflects
who built on Lewin’s work and discussed two more leadership
the owner’s values, beliefs, and attitudes. It creates the opportunity
styles: transformational and transactional. “Much of what we know
to retain and attract talent, increase productivity, and enhance job
now about the dynamic between the leader, the followers, and the
satisfaction.”
situation comes from Bass’s theory of transformational leadership,”
Most community pharmacy owners and managers are highly
said Ohler. These five styles have become pillars in the leadership industry,
skilled pharmacists who excel at their work behind the counter. But becoming a leader is a different kind of work. “Moving from
even as more have been developed and discovered. No matter where
solopreneur to small business owner requires an evolving skillset,
you sit in our pharmacy’s hierarchy, and no matter your personality,
moving from the ‘do-er' to the ‘leader,’” Ohler said.
you can find something of value in these styles as you lead your team. Although these styles each have strengths and weakness, and
The perennial myth is that leaders are born, not made—so there’s nothing you can do to become a better leader, or at least
some are suited to certain personalities more than others, there
there’s a limit to how great you can become. This misconception often
is one priority for choosing your leadership style, Ohler says. “The
persists in our time even though it was debunked in the 1930s by the
real answer lies in what are you trying to accomplish? Leadership
pioneering psychologist Kurt Lewin. “Lewin’s research helped to move
is both an art and a science. All leadership styles have a purpose,
us from trying to identify leaders by looking at the natural qualities
depending on the situation, the leader, the followers, and the type
they exhibited to focusing on their behaviors, their leadership style,”
of organization. The most effective leaders understand how to adapt
Ohler explained. “It was the beginning of the realization that these
to these, allowing them to better diagnose needs, communicate
behaviors can be learned, so anyone has leadership potential.”
effectively, and make decisions.”
Lewin’s research laid the foundation for a new field of study and
HOW TO BECOME A LEADER Leadership is learned. Here are some of Ohler’s best tips for becoming a great leader. •
LEARN to lead yourself. Your potential to lead others is a direct result of how you lead yourself.
•
DEVELOP good followership habits. Choose who to follow and
•
SOLICIT honest feedback from others to identify areas of
•
PARTNER with a leadership coach to focus on enhancing
strength as well as opportunities for improvement. your effectiveness, along with the effectiveness of the team
make followership part of your personal development. •
OBSERVE and learn from established and respected leaders.
•
SEEK out a mentor who is where you want to be.
•
DISCOVER your leadership style through an assessment that can help you understand how to effectively interact with others based on your style.
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and organization. •
ACQUIRE new skills through workshops and programs to help you gain a broader perspective on leadership responsibilities and what it takes to succeed as a leader.
I
AUTHORITARIAN LEADERSHIP (AUTOCRATIC) Authoritarian leaders provide strong, direct leadership. They make the final decisions, typically without feedback from others. They maintain control at all times, often over people and processes all the way to the lowest level of the hierarchy. Decisions start and end at the top, and the rest get aligned through strict rules and processes. Lewin spoke negatively about this type of leadership, showing that it hindered creativity and cooperation and created dysfunctional environments. But other research has shown this can be effective in some contexts and its best version can improve employee performance through clear goal setting, clear direction, and high standards. WHEN IT’S GOOD This leadership is best in situations of urgent need, environments with little room for error, or contexts where the leader has exclusive knowledge. Think of ER doctors, military leaders, or
•
“MY WAY OR THE HIGHWAY METHOD CREATES A HOSTILE, DYSFUNCTIONAL
warehouse supervisors. STRENGTHS
OHLER’S TAKEAWAY:
WEAKNESSES
Clear direction and
•
Lowers morale
vision
•
Breeds resentment
•
Quick decisions
•
Hinders creativity
•
Clearly defined roles
WORK ENVIRONMENT IF THIS IS THE DAILY NORM.”
6 COMMON LEADERSHIP MISTAKES Even the best leaders make mistakes. Gary Ohler lists six common pitfalls. •
•
Lacking self-awareness. Have the humility to get feedback,
•
Staying in the office and being inaccessible to your people.
step back and allow those with the skills to take the lead. The
Get out and walk slowly through the crowd. This is a powerful
leader’s greatest mistake is not asking, “What mistakes am
opportunity to connect with people, ask questions, offer help,
I making?”
understand what makes them tick.
Thinking “I deserve” rather than “I serve.” Look for opportunities
•
to serve and thank your people. How you treat them will be
Not creating a safe place for people to fail—and learn from that failure.
reflected in how they treat the customer. •
Not communicating clearly and consistently.
•
Feeling like you need to have all the answers.
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
21
2
PARTICIPATIVE LEADERSHIP (DEMOCRATIC) Participative leaders interact with their teams, receiving feedback and collaborating on ideas. Though they make the final decisions, those come only after full participation and engagement with others, which includes members lower and higher in the hierarchy. This style gives responsibility to the team members but does not leave them to make decisions alone. The team is heard, empowered, and supported. Lewin’s seminal study concluded that democratic leadership was the most effective leadership style, resulting in increased creativity, cohesion, and friendliness. Members feel appreciated and more invested in the goal when their input is valued. However, research also shows that this style can result in dissatisfaction when input isn’t used, and it lengthens the decision process.
OHLER’S TAKEAWAY:
WHEN IT’S GOOD This leadership is best for most situations that don’t require immediate action, where there is more room for error, and with followers who are intrinsically motivated. STRENGTHS
WEAKNESSES
•
Enhanced creativity
•
Slower decisions
•
Strong unity
•
Harder for large
•
High morale
groups •
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Less productivity
"EVERYONE HAS A VOICE; ALLOWING FOLLOWERS TO HAVE INPUT MAKES THEM FEEL ENGAGED AND MOTIVATED TO BE MOST COMMITTED TO THE GOALS OF THE GROUP.”
3
DELEGATIVE LEADERSHIP (LAISSEZ-FAIRE) Delegative leaders trust their team to make decisions on their own without intervention. They delegate not just menial but momentous tasks. They hire and train highly skilled and trustworthy teams and rely on them to solve their own problems and choose their own direction. Although the leader trusts the team members to make decisions, they still hold themselves accountable. In Lewin’s experiment, the laissez-faire leadership style led to low productivity. People blamed others for problems, lacked direction, and avoided responsibility. However, Lewin’s research was done on children, not highly skilled and competent adults. The delegative approach respects team members’ competency and encourages them to make the most of their skills and abilities. WHEN IT’S GOOD This leadership is best in the early stages of projects, with highly self-motivated teams, or when the members know more than the leader.
OHLER’S TAKEAWAY: “THIS LEADERSHIP IS BEST IN THE EARLY STAGES OF PROJECTS, WITH HIGHLY SELF-MOTIVATED TEAMS, OR WHEN
STRENGTHS •
Empowers employees
•
Allows faster decisions
•
Encourages innovation
WEAKNESSES •
Relies on highly competent team
•
Lacks clear direction
•
Results in low
THE MEMBERS KNOW MORE THAN THE LEADER.”
productivity
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
23
4
TRANSACTIONAL LEADERSHIP Transactional leaders rely on rewards and punishments to motivate their team. The relationship between the leader and the team is based on a transaction rather than a relationship. These leaders are typically task-oriented and focused on outcomes. The effectiveness of transactional leadership hinges on the strength of the reward or punishment, and on the nature of the person receiving them. Some people are highly motivated by external incentives, while others need relationship, support, and shared goals. Ohler notes that this style may achieve short-term outcomes, but it does not inspire followers to excellence. WHEN IT’S GOOD This leadership style is best used with followers who need external rewards and punishments for motivation to perform well. It may also benefit situations where a clear, simple objective needs to be completed in a short time frame. STRENGTHS •
WEAKNESSES
Clear expectations
•
and duties • •
Self-interest over shared interests
Effective for short-
•
Lack of innovation
term
•
Not motivating for
Motivating for some
some followers
followers
OHLER’S TAKEAWAY: “QUID PRO QUO KEEPS THE STATUS QUO; EVERYONE KNOWS THEIR PLACE AND REWARDS AND PUNISHMENTS ARE CONTINGENT UPON THE PERFORMANCE OF THE FOLLOWERS.”
5 SOURCES OF POWER In 1959, psychologists John French and Bertram Raven described five sources of power that can influence others. “Just as with leadership styles, application of these power bases depends on the situation,” Ohler said. “Think of leadership styles and the power bases as a leadership toolbox—the more well-rounded the leader, the more tools they have at their disposal in which to influence and achieve desired outcomes.”
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These are the five sources, provided by Ohler: •
LEGITIMATE: power of position; formal authority, title
•
REWARD: power over resources; perks, incentives
•
REFERENT: power of the relationship; friendship
•
EXPERT: power of knowledge; expertise
•
COERCIVE: power to sanction or penalize; opposite of reward
5
TRANSFORMATIONAL LEADERSHIP Transformational leaders lead through inspiration, empowerment, and involvement. They earn the respect and admiration of their followers. They cast clear visions and unite followers in their shared purpose. They care not only about the profit but the people. Bernard M. Bass named four specific ways these leaders transform their followers: consider individuals, stimulate the intellect, inspire motivation, and serve as a role model. Bass lauded transformational leadership as the best way to lead, resulting in higher performance, satisfaction, and innovation. According to Ohler, “Bass suggested that organizations need leadership that inspires, encourages, and motivates followers to perform in ways that create meaningful change and help shape future success. Bass’s work also established the role of personal values in leadership and idealized the role of influence.” WHEN IT’S GOOD This leadership is best for leaders with high integrity, a charismatic personality, and lots of energy. This style is most effective among higher levels of authority, responsible for grand visions and organizational goals rather than immediate, concrete tasks.
OHLER’S TAKEAWAY: “ASPIRATIONAL TEAM (TOGETHER EVERYONE
STRENGTHS •
High well-being for
WEAKNESSES •
followers •
Increased innovation
•
Inspired, united teams
Assumes intrinsic motivations
•
Requires charisma from the leader
•
Can fail to focus on details
ACHIEVES MORE) RESULTS IN HIGHER PERFORMANCE AND HIGHER GROUP SATISFACTION BUT REQUIRES A LEADER COMMITTED TO A VISION AND SEEING FOLLOWERS LIVE INTO THEIR POTENTIAL.”
OHLER’S BOTTOM LINE: “Leadership is about people. The successful leader knows two things: people are complex and people are different. Leadership is the positive application of social influence which maximizes the efforts of people and energizes them towards the achievement of a common goal. No matter what, it is about getting results through people.” ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
25
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SPOTLIGHT
SCRIPT PICK-UP Remote delivery kiosks provide a cost-effective and profitable expansion for this pharmacy then the unit acts as an ATM for prescriptions,” Smiley said. Patients have a unique login, and they can choose which prescriptions they want to pick up that day. Patients can also get counseling from the pharmacist when they come to pick up their prescription. The kiosk is open the same hours as the main pharmacy location, which ensures that patients can reach the pharmacist if they have questions about their medications. Although Shawnee doesn’t utilize the service, Asteres offers an afterhours counseling option through a third party that allows clients to utilize the kiosks after the pharmacy has closed. GETTING STARTED Getting the ScriptCenter kiosk up and running was simple. “We were given specs so we would know what kind of utility connections and internet access we needed to have,” Smiley said. They had the location scouted to ensure everything was compatible, and then the Asteres
A
s a federally qualified health center serving patients from 10 clinics
team managed the delivery and installation process. Smiley estimates
over a 25-mile radius of southern Illinois, Shawnee Health Center
that the physical installation took about a day for each machine, but
Pharmacy needed a way to get prescriptions to patients near and far
the Asteres staff members spent additional time on-site training staff
while keeping costs low.
and even interacting with patients.
“In 2016, we were looking for a way to extend the pharmacy in a
The biggest challenge on the pharmacy end of implementation
cost-effective way,” said David Smiley, director of pharmacy services.
was finding a way to deal with the distance. “Our most remote kiosk
The first thought was to expand to a second location, but the price
is 25 miles away from our pharmacy, so we had to tailor our training
added up quickly. Mail order helped some patients with access
to the needs of employees at both ends of the operation,” Smiley
to medications, but with so many patients experiencing housing
said. While the workflow of filling prescriptions stayed the same,
insecurity, it was difficult to reach people with 90-day supplies.
pharmacy staff had to learn how to link ScriptCenter prescriptions
Then, Illinois revamped its telepharmacy laws, opening up
to the pharmacy management system, perform video consultations,
a whole new set of options to increase pharmacy accessibility.
and come up with a system for physically delivering medications to
“We started looking at some out-of-the-box, technology-based
the kiosks.
solutions, and we came across Asteres,” said Smiley. Asteres provides
A different set of training tasks had to occur on-location with
pharmacy kiosks and lockers called ScriptCenter that deliver patients
clinic staff. “That role is more patient-facing, and they would get lots
specific prescriptions.
of questions from patients in the waiting room, which is where the
Shawnee Health Center Pharmacy has two ScriptCenter kiosks
machine was located,” Smiley explained. “We spent a couple of hours
located inside clinics within their network. For Smiley’s team, the
doing hands-on training with our clinic staff to get them comfortable
kiosks were a great fit because they allowed them to fill prescriptions
with the machine.” ScriptCenter also provided training modules to
within their traditional workflow and then deliver them securely to
help employees get familiar with the technology.
patients. “Everything gets bottled just like if they were going to pick it up at our pharmacy. The difference comes in with the packaging,”
INCREASING ADHERENCE AND ACCESS
Smiley said. The prescriptions headed to ScriptCenter kiosks are
Having staff members on-site was also helpful when introducing
packaged with a bar-coded bag or clamshell container. When they are
the ScriptCenter kiosks to patients. Though Smiley said that the
placed inside the kiosk, it’s assigned a location within the machine.
ScriptCenter interface is relatively intuitive, some patients still need
“Once that’s done, everything is synced up with our records, and
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additional help getting started. “People who are less technical tend to
need more assistance initially, but they tend to get the hang of it fairly quickly,” he said. It also helps that most people are curious when they see the ScriptCenter kiosk for the first time. “The fact that there’s a big machine sitting in the room that they’ve never seen before makes people ask questions about what it is and how they can get set up to use it, and that helps with the patient training processes.” Before Shawnee Health Center Pharmacy implemented its ScriptCenter kiosks, patients who lived far from the pharmacy had a tough choice to make. “Those that could afford it might have gone to another pharmacy, but if they couldn’t, they unfortunately went without,” said Smiley. The ScriptCenter kiosks allowed the pharmacy to reach those patients more consistently and get prescriptions into their hands in a secure way. “For those patients who are most at risk, adherence has improved dramatically,” Smiley said. “They now have a reliable access point to receive their medications at a lower cost.” Smiley added that for patients who have medical conditions with social stigmas attached, the ScriptCenter has provided muchdesired privacy. “They aren’t always super comfortable interacting with the staff in a typical pharmacy setting, and they feel uneasy about picking up their medication,” he said. “We find these patients really like the ScriptCenter because although the counseling takes place in a common area, the telepharmacy video link allows a more private interaction that is one-step removed from traditional faceto-face counseling.” The kiosk has helped increase access for those who may experience a language barrier when visiting the central pharmacy
QUICK EXPANSION With a pharmacy kiosk like ScriptCenter, you can expand your pharmacy without incurring hefty startup costs. While Shawnee Health Center Pharmacy’s ScriptCenter kiosks are located within clinics that are part of their network, you don’t have to be a part of a health network to take advantage of prescription kiosks. You could place your kiosk in locations like: •
CORPORATE OFFICES
•
SENIOR LIVING FACILITIES
•
GROCERY STORES
•
COMMUNITY CENTERS
As long as the kiosk is placed in a secure, indoor location, and it’s within the regulatory guidelines outlined by your state board of pharmacy, you’re good to go. Asteres can help you determine the specific regulatory requirements in your state.
location, as the machine can be programmed to run in English and Spanish. IMPLEMENTATION TIPS For pharmacies considering implementing remote kiosks, Smiley recommended having a clear idea of how the technology aligns with your current business model and pharmacy goals. “For us, the model was delivering low-cost prescriptions, but for a more traditional community pharmacy that’s operating as a for-profit entity, you have to look at that side of it,” he said. He also brought up the limitations of the kiosk being so far removed from the main pharmacy location. “With us being 25 miles away from our farthest kiosk, it means we can’t immediately provide prescriptions at the kiosk. They can’t go into the clinic and get a prescription for an antibiotic and then pick it up in the waiting room on their way out the door,” he said. For Shawnee Health Center Pharmacy, the kiosks are perfect for routine medications that are picked up month after month. It’s also critical for pharmacies to be aware of the telepharmacy laws in their state that can impact how the kiosk is used. There may be mileage restrictions or facility requirements that make it infeasible to use a kiosk.
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
29
MONEY
CASH VS. ACCRUAL ACCOUNTING How to choose the right accounting method for your pharmacy
W
hen you keep track of transactions in your independent
CASH FLOW
pharmacy, you have a choice between two accounting
When you use the accrual method and record income as soon as
methods: the accrual method and the cash-basis method. “Timing is one of the big differences when it comes down
the transaction occurs, it appears as earned revenue, even if you don't actually have that money in your pocket. The same goes
to these two methods,” said Scotty W. Sykes, CPA at Sykes &
for your expenses. "When tied all together, it gives an accurate
Company, P.A., which specializes in accounting services for
representation of how you performed in any given period," Sykes
independent pharmacies.
said. "You're seeing exactly what transpired, even if you haven't
More specifically, the difference between accounting methods is when your income and expenses are recognized. The
gotten paid or paid the bill yet." However, it doesn't necessarily reflect what's happening in
accrual accounting recognizes income and expenses as soon as
your bank account. You could look at a month where you had a net
a transaction occurs. The cash-basis method recognizes income
income of $50,000, but the money in your bank account only went
only once you’ve collected the cash. Sykes gave this example: Say
up by $10,000. "You may be asking yourself, where is the rest of
you dispense a prescription, and the PBM pays you 30 days after
this cash? That's where you have to understand that a lot of money
the sale. Under the accrual method, you would record the income
is sitting in your accounts receivable as money owed to you, or it's
when you dispense the medication and register the sale. Under the
sitting on your shelf as inventory," Sykes said.
cash method, you would record the income 30 days later, when you receive the payment from the PBM. On the expense side, if an electrician hands you a bill, you
Using the cash-basis method, your accounting will be a more or less accurate reflection of your bank account. It's simple to adopt, which can be appealing for small businesses. "It's
would record that expense right away under the accrual method,
essentially a checkbook," Sykes said. You don't necessarily get a full
whether you paid for it then or not. Under the cash method, you
representation of what's happening month-to-month, because you
wouldn't record the expense until the bill had been paid.
may get a payment from revenue you earned the month before,
While this may seem like a minor math difference, the accounting method you choose can have a big impact on your
but you will have a better sense of how cash is flowing in and out of your pharmacy.
pharmacy’s cash flow, taxes, and bookkeeping.
30
ACCRUAL ACCOUNTING
CASH-BASIS ACCOUNTING
Recognize revenue when it’s earned
Recognize revenue when it’s received
Recognize expenses when they are billed
Recognize expenses when they are paid
Pay taxes on income even if you haven’t received it
Only income that has been received is taxed
Accurate snapshot of overall profitability
Accurate snapshot of current cash flow
Required if you have over $25 million in gross receipts
Allowed for most independent pharmacies by the Tax Cuts and Jobs Act, through 2025
pbahealth.com/elements
TAX IMPLICATIONS
own multiple pharmacies, cash-basis accounting may not be an
Before the Tax Cuts and Jobs Act (TCJA) passed in 2017, most
option for you.
pharmacies were required to use the accrual method of accounting
The other limitation is that the TCJA expires in 2025. Unless
for tax purposes. However, the law opened the door for pharmacies
it's renewed, most pharmacies will have to return to the accrual
to adopt the cash method—which Sykes said is an advantageous
method of accounting.
switch for most independent pharmacies. If you switch from the accrual method of accounting to the
BOOKKEEPING
cash-basis method, you’ll take your receivables off the books as a
From a bookkeeping perspective, Sykes recommends using the
write-off. Sykes said, "That's a large number that you're writing off
principles of the accrual method. "Accrual-based books are going to
as an expense. It reduces your taxable income in most instances,
give the clearest picture of how a pharmacy is actually performing
which has a lot of value for tax mitigation purposes."
from month to month," he said. Then, at the end of the year, there's
The changes made by the TCJA did introduce some ambiguity
a process that converts the books so the accountant can perform
about how inventory should be handled under cash-basis
the year's taxes on a cash basis. "The best advice in my opinion is to
accounting. "A lot of the industry decided to interpret the language
keep accrual-based books and keep the reconciliation of the cash
as saying that inventory could be expensed for tax purposes, which
method with your tax advisors."
created an even larger spending write-off against your income for
If you choose not to use accrual-based bookkeeping for your
that period," Sykes said. However, a decision by the IRS and the
pharmacy, it's crucial to not lose track of your receivables. With a
Treasury Department that was handed down in 2021 determined
few exceptions, pharmacies that use the cash-basis method won’t
that businesses had to keep their inventory on the books for
have accounts receivable or accounts payable on their books.
tax purposes.
Sykes said, "There are some folks we hear of that do cash-basis
Pharmacies that wrote off inventory in prior years will have
accounting, and they say it's easy. They don't look at the receivables
to change their practices for the 2022 tax year. "Speak with your
and they just assume that they get paid. We think that’s a pretty
advisor," Sykes said. "It's a big change. Your inventory is going to
dangerous approach.”
count as income, so pharmacies need to do a lot of planning around this issue."
Business owners need to know exactly who they owe and who owes them. If not, it's possible you won't get paid money that is
Overall, Sykes said, "Rule of thumb, cash-basis is a better
owed to you, but never realize it. "Develop a system to keep track
decision for most pharmacies. However, there are some limitations.
of what's outstanding and what is owed in 30, 60, or 90 days," Sykes
If you're running losses already, it may not make sense." It should
recommended. "There's technology available to help you do that,
also be noted that businesses with gross receipts of over $25 million
and it's an important tool for pharmacies to really understand
are still required to use the accrual method of accounting, so if you
their business."
WHICH METHOD SHOULD YOU USE? BEST METHOD FOR BOOKKEEPING: ACCRUAL
BEST METHOD FOR TAXES: CASH
BEST METHOD FOR TRACKING CASH FLOW: CASH
ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
31
OUTLOOK
REBATES, GET YOUR REBATES Wholesaler rebates are complicated. Learn how to measure and maximize them.
O
n the surface, calculating a pharmacy’s cost of goods is simple. When you put in an order, you receive an invoice
with a straightforward dollar amount. That’s what you pay to stock your shelves. But as seasoned pharmacy owners and operators know, that is not the end of the equation. The invoice price does not reflect the actual price of goods at the end of the month. That’s because pharmacies receive money back from wholesalers based on their purchasing decisions. These rebates play an enormous role in your final cost of goods, potentially reducing it by thousands of dollars. Because inventory is your biggest expense, it’s crucial to know how wholesalers determine your rebates so you can get an accurate measurement of your cost of goods, rather than counting on your invoice alone. These principles will help you calculate your wholesaler rebate and take control of your pharmacy finances. WHAT DETERMINES YOUR REBATES What makes your wholesaler rebate so complicated is that it's not based on one simple formula. Several terms can affect your rebate, and changing one affects the others. These are some of the most common factors used to calculate pharmacy wholesaler rebates: generic compliance, performance incentives, specified contract terms, total volume, percentage of volume, and more. To calculate your rebates, you have to track all of these incentives simultaneously. Out of the litany of factors that affect how your pharmacy wholesaler rebate is calculated, one stands out: the generic compliance ratio, also referred to as monthly source compliance or another similar title. The generic compliance ratio is typically defined by the percentage of generic purchases compared to your total purchases. GENERIC COMPLIANCE RATIO = GENERIC PURCHASES / TOTAL PRESCRIPTION PURCHASES Generic compliance rebates are rewarded on a tiered system,
FACTORS THAT INFLUENCE YOUR REBATE GENERIC REBATE BASED ON GENERIC RATIO Rebates for reaching a specified ratio of generic purchase volume relative to overall Rx volume GENERIC REBATE BASED ON GENERIC DOLLAR VOLUME Rebates for reaching a specified dollar volume of generic purchases ADDITIONAL PERFORMANCE/PROGRAM RELATED INCENTIVES Rebates based on participation in certain programs or specified performance metrics SPECIFIED CONTRACT ITEMS Portfolio of generic contract items that are eligible for rebate DESIGNATED SPECIALTY ITEMS More expensive brand items that factor into incentive structures differently than traditional brand items PAY TERMS Additional discounts based on how quickly the pharmacy pays for the inventory TOTAL DOLLAR VOLUME COMMITMENTS Total dollar amount the pharmacy agreed to commit to purchase from wholesaler PERCENTAGE OF VOLUME COMMITMENTS Percentage of purchases the pharmacy agreed to commit to purchase from wholesaler
which means the more generics you buy, the more you're rewarded. For example, a wholesaler's rebate structure might say that if you purchase 10 percent generics, you get a 10 percent rebate. But if you purchase 15 percent generics, you can get a 20 percent rebate. Some wholesalers may offer rebates of up to 35 percent. There's a lot of money on the table for pharmacists who maximize their generic compliance. Pharmacists who pay attention to this number can see rebates of more than a hundred thousand dollars in a single year. See the table as an example rebate matrix for generic compliance. ELEMENTS | The business magazine for independent pharmacy | JUNE 2022
33
TIER
GCR
REBATE %
TOTAL REBATE $
GET BETTER REBATES, GUARANTEED Between driving a hard bargain during negotiations and constantly monitoring your purchasing to ensure you’re meeting your contract terms, calculating your pharmacy
TIER 1
23%
33%
17,509
wholesaler rebate can turn into a full-time job. With ProfitGuard®, you can take those tasks off your plate and get back to patient care. ProfitGuard takes the uncertainty out
TIER 2
20%
30%
13,841
of data analytics and does all the monitoring and predicting for you. ProfitGuard provides daily purchasing recommendations to ensure you’re maximizing your rebates by fulfilling all your contract incentives while also saving money on sticker prices.
TIER 3
18%
25%
10,381
TIER 4
15%
15%
5,190
In other words, it ensures you’re paying the lowest cost of inventory and earning maximum profit. “The Navigation report is short and to the point, allowing us to maximize our rebates by allocating purchases to the proper supplier," says Dick Roberts, owner of Eureka Pharmacy. “Now we are able to move purchases … to maximize our generic
TIER 5
10%
10%
2,306
compliance ratio on both accounts and maximize our rebates.” ProfitGuard members have averaged between $70,800 and $212,400 in annual savings on their cost of goods.
MAKING THE MOST OF INCENTIVES Maximizing your contract incentives means walking a fine line between purchasing drugs from the most affordable secondaries and maxing out your potential primary rebate. Though it may seem counter-intuitive, to get the lowest cost of goods, you don’t always need to buy drugs at the lowest prices. You may be able to get an item cheaper at a secondary wholesaler, but that could cost you in the long run. Because so many primary wholesaler rebates require hitting certain volume commitments, spreading out your purchases across secondary wholesalers could make you ineligible for bigger savings. To keep your pharmacy in the highest rebate tier, keep a constant eye on your purchasing data. If you're currently at a generic compliance ratio of 19 percent, it's probably smarter to keep purchasing generics from your primary wholesaler and get yourself into a more profitable rebate tier rather than going with cheaper options at a secondary. The savings you can reap when you achieve that higher tier will likely outweigh what you'd save on any individual purchase from a secondary. For example, a seemingly innocuous purchase outside the primary contract may take you from 18% to 17.99%, which would drop you a tier and lose you more than $4,000 for that month (according to the sample matrix we’re using). That doesn't mean you can never buy secondary items, but it's critical to be aware of where you stand within your rebate structure before looking outside of your primary wholesaler to save a few bucks.
34
pbahealth.com/elements
“It’s worked great for us,” said John McNeill, owner of Nichols Southside Pharmacy. “It saves us a lot of time. It’s been great for our pharmacy in terms of maximizing our rebate percentages.”
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